Neoliberalism in Brazil

1312 Words Jul 15th, 2018 6 Pages
In an article entitled “Resisting and reshaping destructive development: social movements and globalizing networks”, P. Routledge describes neoliberal development, “Contemporary economic development is guided by the economic principles of neoliberalism and popularly termed ‘globalization’. The fundamental principal of this doctrine is ‘economic liberty’ for the powerful, that is that an economy must be free from the social and political ‘impediments,’ ‘fetters’, and ‘restrictions’ placed upon it by states trying to regulate in the name of the public interest. These ‘impediments’ - which include national economic regulations, social programs, and class compromises (i.e. national bargaining agreements between employers and trade unions, …show more content…
(Filho)
Second, exchange rate overvaluation: enhances the impact of trade liberalization on inflation and competitvity. These policies are very effective against inflation, and can be very popular with consumers. However, their impact on the balance of payments, local industry, and employment can be destructive. Brazilian goods imports increased from US$20.6 billion to US$50.0 billion between 1992 and 1995. (Filho)
Third, domestic financial liberalization: was expected that the deregulation of the financial sector would help to increase savings and the availability of resources for investment. However, the opposite occurred, both savings and investment rates declined. The savings rate fell from 28% of GDP in the mid-eighties to around 20% in the mid-nineties and below 15% in 2001, while investment rates fell from an average of 22.2% of GDP in the eighties, to 18.2% in the nineties, and 16.1% in 2001-2006. The inflow of foreign capital may have replaced rather than enhanced domestic savings, financing consumption rather than investment. The decline of the investment rate helps to explain the dismal growth rates in Brazil: between 1994 and 1999, Brazil’s average annual real GDP growth rate was only 2.6% (3.2% between 1994 and 2008). On the other hand, the economy grew on average by 6.4% per annum between 1933 and 1980. (Filho)
Fourth, fiscal reforms: the public sector deficits that stimulated high inflation were addressed. These reforms were
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